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EFC Policy Recommendations

Promote Excellence in Servicing

Leverage Expertise of Nonprofit and State-Based OrganizationsEFC represents all of the not-for-profit (NFP) Federal Direct Loan servicers. As mission-driven, public-purpose entities, these organizations have decades of experience in doing right by student loan borrowers. This is evident in the consistently excellent scores the NFP servicers have received on the Education Department’s performance metrics and in their high borrower satisfaction ratings for customer service. EFC strongly urges Congress to ensure that the expertise of these organizations is leveraged in future student loan servicing solicitations or platforms.

Recommendation: EFC encourages Congress to ensure that the expertise of nonprofit and state-based organizations is leveraged in future student loan servicing solicitations or platforms.

Ensure Fair and Equitable Treatment for All Direct Loan (DL) ServicersEFC member organizations have invested a great deal of time, money, and resources into providing exemplary service to borrowers and the Education Department. EFC encourages the Department to continue to embrace the new Direct Loan servicing allocation methodology of allocating new student loan accounts using common performance metrics across all DL servicers.

Recommendation: EFC recommends a continuation of the current servicing allocation methodology and encourages the Education Department to hold an open and fair bid process for future servicing solicitations that recognizes the value and expertise of the not-for-profit DL servicers.

Ensure a Competitive Servicing LandscapeUnder current Direct Loan servicing contracts, EFC recommends that Congress direct the Education Department, as it works to improve the Direct Loan servicing system, to ensure the continued inclusion of multiple servicers handling all aspects of servicing loans. Such a marketplace will foster a competitive environment and ensure that borrowers and the Education Department have the leverage necessary to make sure servicers work in the best interest of borrowers while continuously working to improve their service and outcomes.

Recommendation: EFC strongly recommends that the Education Department create and manage a competitive servicing environment that holds servicers accountable for their ability to best serve the needs of student loan borrowers.

Codify Consumer Protections in Federal StatuteEFC is concerned that a growing number of individual states are seeking to impose state-level laws and regulations on student loan servicers contracted by the federal government to service federal student loans. If left unchecked, these state efforts will continue to add an unnecessary web of regulations which are both duplicative of and potentially contradictory to existing federal regulations and policies.

EFC supports efforts to ensure that all student loan borrowers receive high-quality service. However, student loan servicers are already heavily regulated by the Education Department and the Consumer Financial Protection Bureau; new state-level regulations would replicate these requirements with no additional benefit for borrowers, and at burdensome cost to servicing entities.

Rather than allow states to implement a patchwork and contradictory regulatory scheme that differs across state lines, EFC recommends that important consumer protections for student loan borrowers instead be codified in federal statute through the Higher Education Act.

Recommendation: EFC understands the need for consumer protections for student loan borrowers, and therefore supports the implementation of consumer-protection laws for student loan borrowers at the federal level, coupled with a federal preemption for federal contractors from state-level laws and regulations.

Designate Not-For-Profits as Small Businesses for Student Loan Servicing ContractsEFC urges Congress to have not-for-profit servicers — who have a proven track record of excellent service — designated as small businesses for the purposes of any prime and subcontracting contracts.

Recommendation: EFC recommends that existing and future federal student loan servicing contracts receive credit toward the small business requirement if they subcontract state-based and/or nonprofit organizations with expertise in assisting borrowers in the repayment of their student loans.

Reinstitute a Common Operations ManualTo address concerns about consistency of service across multiple servicers, EFC recommends that Congress direct the Education Department to reinstitute a highly prescribed and continuously updated Common Operations Manual. This will ensure consistent performance and accountability across all servicers. A Common Operations Manual was very successful in ensuring consistency under the FFELP program where there were multiple lenders, multiple origination and servicing platforms, and multiple servicers. It should be equally successful with one lender, four servicing platforms, and multiple servicers.

A Common Operations Manual for Direct Loan servicers has been recommended to the Education Department in the past, but has never been implemented. Allowing for multiple servicers, who all adhere to a common set of operational requirements, will maintain a competitive environment while allowing servicers the flexibility to develop best practices and to continuously innovate to better serve borrowers and taxpayers.

Recommendation: EFC strongly endorses Congress’ prior recommendation — one that servicers support — that the Education Department create a Common Loan Servicing Operations Manual to drive high-quality servicing for all borrowers and ensure consistency and accountability across all servicers.